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What are the challenges of creating an online marketplace with tangible products?

I have experience with creating a marketplace that sells intangible products (software, media, etc.) but have wondered about what pitfalls might exist for a similar marketplace where vendors could sell their own tangible/shippable products. Could it be as simple as having them create an account and start selling and then fulfilling the products themselves?

I suppose that is how Amazon does it?

Various vendors end up fulfilling their own products, but Amazon just takes care of the order process?

The big question that is always a challenge for a marketplace is refereeing between buyers and sellers when there is a conflict. Basically, what processes are in place to make sure there is a resolution if a transaction turns sour between buyer and seller. Ebay, for example, tends to favor the buyer and any loss for the seller is to be viewed as a "cost of doing business." Conversely, Amazon does a bit more with eating some costs themselves if there is an issue. These are gross generalizations about these marketplaces, but in order for a marketplace to succeed it needs to be trusted and liked by BOTH buyers and sellers. Otherwise, each group will continue to look for alternate channels outside your marketplace. Let me know if you would like more insight, specifics or solutions.

I think the most important issue you should think about is getting traffic to your website. I have heard of this idea before-people who want to create an online marketplace where vendors can sell their wares-, not to mention all the sites currently available who do this, and the biggest hurdle is getting the traffic and, hopefully, enough sales, to make it worth the time and effort for you and your vendors.

Challenges that I've seen include:
- having orders placed but not fulfilled
- having vendors work around the payment process
- having shopping cart/marketplace software that handles shopping carts + shipping fees from various locations